Cost-benefit analysis is used for determining which alternative is likely to provide the greatest return for a proposed investment. Sometimes referred to as cost-effectiveness analysis, it is relevant to businesses as well as to not-for-profit entities and governmental units.

A business might find it helpful to use cost-benefit analysis to determine if additional funds should be invested in a facility in the home country or in another country. A community not-for profit organization that provides a variety of programs for children might use cost-benefit analysis to assist management in determining which activities will provide the most services for the costs specified. A federal governmental agency might use cost-benefit analysis to determine which of several projects planned for the national parks is likely to be most used, given the costs, by interested citizens.

Because resources such as money and time are limited, an organization usually cannot undertake...